Code of Ethics and Standards of Professional Conduct MCQs – CFA Level 1
Ethics can be defined as a set of moral principles or rules of conduct that provide guidance for our behavior when it affects others. Here in MCQs.club we have prepare easy and understandable Multiple-Choice Questions (MCQs) on Study Session 1 Code of Ethics and Standards of Professional Conduct that fully cover MCQs on cfa institute code of ethics, cfa level 1 ethics questions, ethical and professional standards cfa level 1. These cfa level 1 ethics notes and flashcards are also useful for competitive exams, other professional accountancy exams and business management exams.
Ethics and the investment industry
- Society ultimately benefits from efficient markets where capital can freely flow to the most ______________ destination.
- Productive
- Innovative
- Both A&B
- None
- Well- functioning capital markets efficiently match those needing capital with those seeking to invest their assets in revenue- generating ventures.
- True
- False
- In order for capital markets to be efficient, investors must be able to trust that the markets are fair and transparent and offer them the opportunity to be rewarded for the risk they choose to take.
- The above statement is correct
- The above statement is incorrect
- Laws, regulations, and enforcement play a vital role but are insufficient alone to guarantee fair and trans- parent markets.
- False
- True
- Ethics can be defined as a set of moral principles or rules of conduct that provide guidance for our behavior when it affects others.
- The above definition is correct
- The above definition is incorrect
- Widely acknowledged fundamental ethical principles include:
- honesty, fairness
- diligence
- care and respect for others
- All of the above
- Unethical behavior by individuals have serious personal consequences—ranging from:
- job loss and reputational damage
- fines and jail
- Both A&B
- None
Ethics, Society, and the Capital Markets
- The premise “for the ultimate benefit of society” is that we want to live in a:
- Socially
- Politically
- Financially stable society that fosters individual well- being and welfare of the public
- All of the above
- A well- functioning and efficient capital market system is dependent on trust of the participants.
- True
- False
- Decreased investment capital can reduce innovation and job creation and hurt the economy and society as a whole.
- True
- False
- Reduced trust in capital markets can result in a less vibrant, if not smaller, investment industry.
- True
- False
- Ethics for a global investment industry should be universal and ultimately support trust and integrity above acceptable local or regional customs and culture.
- The above statement is correct
- The above statement is incorrect
- Universal ethics for a global industry strongly supports the:
- efficiency, values
- mission of the industry as a whole
- Both A&B
- None
Capital Market Sustainability and the Actions of One
- In addition to committing to the highest levels of ethical behavior, today’s investment professionals and their employers should consider the long- term health of the market as a whole.
- The above statement is correct
- The above statement Is incorrect
- Which of the following is correct for Ethical principles, like laws and regulations?
- They prescribe appropriate constraints on our natural tendency to pursue self- interest that could harm the interests of others.
- They often attempt to guide people toward ethical behavior, but they do not cover all unethical behavior.
- Both A&B
- None
- Ethical principles go beyond that which is legally sufficient and encompass what is the right thing to do.
- True
- False
- Which of the following statement is correct?
- lack of sufficient resources to enforce well- conceived rules and regulations, relying on a regulatory framework to lead the charge in establishing ethical behavior has its challenges.
- Reliance on compliance with laws and regulation alone is insufficient to ensure ethical behavior of investment professionals or to create a truly ethical culture in the industry.
- Both A&B
- None
- When faced with an ethical dilemma, individuals must have a well- developed set of principles; otherwise, their thought processes can lead to:
- equivocation and indecision
- fraudulent conduct and destruction of the public trust
- Both A&B
- None
- An investment professional’s natural desire to “do the right thing” must be reinforced by building a culture of ___________ in the workplace.
- Due diligence
- Integrity
- Care
- All of the above
- _________________within the firm by senior management may be the single most important factor in promoting ethical behavior among the firm’s employees.
- Development
- Maintenance
- Demonstration of a strong culture of integrity
- All of the above
CFA institute code of ethics and standards of professional conduct
- Members of CFA Institute (including CFA charter holders) and candidates for the CFA designation (“Members and Candidates”) must:
- Act with integrity, competence, diligence, and respect and in an ethical manner.
- Place the integrity of the investment profession and the interests of clients above their own personal interests.
- Promote the integrity and viability of the global capital markets for the ultimate benefit of society.
- All of the above
- Which of the following is correct with regard to “Professionalism”?
- Members and Candidates must understand and comply with all applicable laws, rules, and regulations.
- Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities.
- Both A&B
- None
- Which of the following is correct with regard to “INTEGRITY OF CAPITAL MARKETS”?
- Members and Candidates who possess material nonpublic information that could affect the value of an investment must not act or cause others to act on the information.
- Members and Candidates must not engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants.
- Both A&B
- None
- Identify which of the following are the Duties of CFA Members and Candidates towards the clients?
- Members and Candidates must act for the benefit of their clients and place their clients’ interests before their employer’s or their own interests.
- Members and Candidates must deal fairly and objectively with all clients.
- Members and Candidates have a duty of loyalty to their clients and must act with reasonable care and exercise prudent judgment.
- All of the above
- When CFA Members and Candidates are in an advisory relationship with a client, they must:
- Judge the suitability of investments in the context of the client’s total portfolio.
- Make a reasonable inquiry into a client’s or prospective client’s investment experience, risk and return objectives, and financial constraints prior to making any investment recommendation.
- Both A&B
- None
- When CFA Members and Candidates are responsible for managing a portfolio to a specific mandate, strategy, or style, they must:
- make only investment recommendations
- take only investment actions that are consistent with the stated objectives and constraints of the portfolio.
- Both A or B
- None
- When communicating investment performance information, CFA Members and Candidates must make reasonable efforts to ensure that it is:
- Fair
- Accurate
- Complete
- All of the above
- CFA Members and Candidates must keep information about current, former, and prospective clients confidential unless:
- The information concerns illegal activities on the part of the client or prospective client
- Disclosure is required by law
- The client or prospective client permits disclosure of the information.
- All of the above
- Which of the following is INCORRECT with to CFA’s DUTIES TO EMPLOYERS?
- Members and Candidates must act for the benefit of their employer and not deprive their employer of the advantage of their skills and abilities.
- Members and Candidates must accept gifts, benefits, compensation, or consideration.
- Members and Candidates must make reasonable efforts to ensure that any- one subject to their supervision or authority complies with applicable laws, rules, regulations, and the Code and Standards.
- All of the above
- Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from or paid to others for the recommendation of products or services.
- The above statement is correct
- The above statement is incorrect
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